Gold Drops Sharply From Its Highs
The gold (XAU/USD) price plunged by 2.42% on Friday as investors closed their long positions to cover losses from a wider market meltdown. The market drop was driven by an intensifying trade war that sparked global recession fears.
Escalating trade tensions between the US and China led to a second day of global stock market downturn. The S&P 500 and Nasdaq Composite fell around 5% after China imposed 34% tariffs on all US goods in response to US tariffs. Jerome Powell, Federal Reserve (Fed) Chairman, said that Trump’s new tariffs are ’larger than expected’ and will likely result in a major economic fallout, including higher inflation and slower growth.
Amid growing fears of a global recession, investors are offloading risky assets like equities, and this bearish sentiment has extended to the gold market.
"We tend to see gold as a liquid asset being used to meet margin calls elsewhere, so it’s not unusual for gold to sell off after a risk event given the role that it can play in a portfolio. It’s behaving in line with the historical trends", said Suki Cooper, an analyst at Standard Chartered.
Despite its recent fluctuations, gold showed a strong performance, rising by approximately 15.3% since the beginning of the year. The rise was fuelled by significant central bank purchases and gold’s status as a safe-haven asset during economic and geopolitical instability.
XAU/USD fell during the Asian trading session but started to recover during the early European hours, continuing to move above the 25-day moving average. Today, the economic calendar is relatively uneventful. However, it’s important to monitor any news and developments related to trade tariffs and possible trade negotiations—especially involving big players like the US, China, India, and the European Union. Scott Bessent, the US Treasury Secretary, said that more than 50 nations had started negotiations with the US since Wednesday’s tariff announcement.
Euro Moves Lower as Traders Worry About Eurozone’s Economy
The euro (EUR/USD) lost 0.86% against the US dollar (USD) on Friday as the better-than-expected nonfarm payroll report supported the greenback.
The US Labour Department reported last Friday that nonfarm payrolls rose by 228,000 jobs last month, significantly above the expected 137,000. On the one hand, the data is bullish for the US dollar because it may prompt the US Federal Reserve (Fed) to delay rate cuts. On the other hand, the market is forward-looking and recognises that Donald Trump’s import tariffs threaten the labour market’s stability.
"Employment report feels more dated and backwards-looking than usual. The sharp escalation in trade tensions has fundamentally altered the economic outlook. Accordingly, the outlook for the US labour market going forward is less sanguine than it was one month ago", said Michael Pugliese, a senior economist at Wells Fargo.
At the same time, investors are not particularly enthusiastic about the eurozone’s economy either. Europe faces 25% import tariffs on steel, aluminium, and cars and 20% reciprocal tariffs for almost all other goods. According to Greek central bank Governor Yannis Stournaras, US tariff policies could reduce the eurozone’s economic growth by 0.5 to 1 percentage point. Meanwhile, interest rate differentials still favour the greenback. Investors currently price in a 92% chance that the European Central Bank (ECB) will cut the rates next week, while the chances of a similar move by the Fed are roughly 50%.
EUR/USD rose during the Asian and early European trading sessions. Today, there are no scheduled important economic reports. The trade war now grips the whole world, and investors fear a potential global economic recession. Thus, traders should monitor any news and developments related to trade tariffs and possible negotiations—especially involving big players like the US, China, India, and the European Union. Key levels to watch are resistance at 1.10510 and support at 1.09540.
Australian Dollar Plunges Towards a Five-Year Low
The Australian dollar (AUD/USD) plunged by more than 4.5% against the US dollar (USD) on Friday, recording one of the worst daily performances in a post-Covid era.
The Australian dollar—often considered a proxy for the Chinese yuan—hit a five-year low against the greenback after China announced additional tariffs on US goods on Friday. Tariffs of 34% on all US goods will take effect on 10 April, marking the most serious response so far in the trade war with US President Donald Trump. This retaliation added to recession concerns and intensified a global stock market panic. AUD/USD is a highly risk-sensitive Forex pair, so it plunged sharply as investors rapidly fled from riskier assets.
Jim Chalmers, Australian Treasurer, said the country will be able to manage the direct impact of new tariffs, but economic growth will take a hit as the global economy slows. He said the government expected US and Chinese economic growth to take ’big hits’ due to the trade war triggered by Trump’s tariff regime. Chinese Gross Domestic Produce is projected to be 0.6% lower this year than the current expectations, reflecting the tariff changes. Investors are now pricing in a 20% chance that the Reserve Bank of Australia (RBA) will cut the rates by 50 basis points (bps) in May.
AUD/USD fell during the Asian and early European trading sessions, hitting a new five-year low. Today, the economic calendar is relatively uneventful. The most important events will be news and developments related to trade tariffs. Now, the world is closely monitoring possible trade negotiations, especially involving big players like the US, China, India, and the European Union. Any news about negotiations may affect the market, adding volatility to all Forex pairs. Key AUD/USD levels to watch are resistance at 0.60610 and support at 0.59300.